Is There Now An Opportunity In Canadian Tire Corporation, Limited (TSE:CTC.A)?

By
Simply Wall St
Published
November 07, 2021
TSX:CTC.A
Source: Shutterstock

While Canadian Tire Corporation, Limited (TSE:CTC.A) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the TSX, rising to highs of CA$202 and falling to the lows of CA$176. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Canadian Tire Corporation's current trading price of CA$184 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Canadian Tire Corporation’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Canadian Tire Corporation

Is Canadian Tire Corporation still cheap?

Great news for investors – Canadian Tire Corporation is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is CA$264.57, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Canadian Tire Corporation’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Canadian Tire Corporation?

earnings-and-revenue-growth
TSX:CTC.A Earnings and Revenue Growth November 8th 2021

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of Canadian Tire Corporation, it is expected to deliver a negative earnings growth of -10%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Although CTC.A is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to CTC.A, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on CTC.A for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 3 warning signs for Canadian Tire Corporation (of which 1 is significant!) you should know about.

If you are no longer interested in Canadian Tire Corporation, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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